Check your understanding: If a Forex dealer wishes to increase his net position in a particular currency, he or she would do which of the following: A. Raise the bid and lower the ask B. Lower the bid and lower the ask C. Raise the bid and raise the ask D. Lower the bid and raise the ask
D
A? hmm or maybe B?
By the wy, this is also true of stocks and other instruments.
Gotta be C no? If he wants to increase the position he is willing to pay more for it (i.e. raise bid) while at the same time reducing the amount he is selling (i.e. raise ask so fewer people buy from you). Whats the answer?
C
Answer is C The reverse (lower position) was in book 7 and I got it wrong.
C
I like C. If a dealer wants more Euros, he will be willing to pay more for them so his bid price goes up. However, he doesn’t want to sell Euros. If he does that, he will decrease his position in Euros. So he also increases his asking price so he will sell less Euros, thus increasing his net position. Higher Bid= Buy more Euros Higher Ask = Sell Less Euros Net effect= Higher net position in Euros Thats my best guess
So simple! C
CLT2 Wrote: ------------------------------------------------------- > I like C. > > > If a dealer wants more Euros, he will be willing > to pay more for them so his bid price goes up. > > However, he doesn’t want to sell Euros. If he does > that, he will decrease his position in Euros. So > he also increases his asking price so he will sell > less Euros, thus increasing his net position. > > > Higher Bid= Buy more Euros > > Higher Ask = Sell Less Euros > > Net effect= Higher net position in Euros > > > > > Thats my best guess ^^^ This is correct
AF rocks. C.
DanLieb Wrote: ------------------------------------------------------- > CLT2 Wrote: > -------------------------------------------------- > ----- > > I like C. > > > > > > If a dealer wants more Euros, he will be > willing > > to pay more for them so his bid price goes up. > > > > However, he doesn’t want to sell Euros. If he > does > > that, he will decrease his position in Euros. > So > > he also increases his asking price so he will > sell > > less Euros, thus increasing his net position. > > > > > > Higher Bid= Buy more Euros > > > > Higher Ask = Sell Less Euros > > > > Net effect= Higher net position in Euros > > > > > > > > > > Thats my best guess > > ^^^ > This is correct How is this different from what I said?
Extra credits: If trading volume is light, will the spread by wide or narrow? If there is 200 days before expiration of a forward currency contract, will the spread be more or less than if there were 10 days before expirartion?
Light trading volume = wider spread Longer contract = wider spread
volume light = wider spread 200 days before expiration = wider spread?
One final parting shot: Bid = 100, ask = 102 What’s the spread in percentage terms?
adavydov7 Wrote: ------------------------------------------------------- > DanLieb Wrote: > -------------------------------------------------- > ----- > > CLT2 Wrote: > > > -------------------------------------------------- > > > ----- > > > I like C. > > > > > > > > > If a dealer wants more Euros, he will be > > willing > > > to pay more for them so his bid price goes up. > > > > > > > However, he doesn’t want to sell Euros. If he > > does > > > that, he will decrease his position in Euros. > > So > > > he also increases his asking price so he will > > sell > > > less Euros, thus increasing his net position. > > > > > > > > > Higher Bid= Buy more Euros > > > > > > Higher Ask = Sell Less Euros > > > > > > Net effect= Higher net position in Euros > > > > > > > > > > > > > > > Thats my best guess > > > > ^^^ > > This is correct > > > How is this different from what I said? Same thing. I just read the question and didn’t see your response.
Dreary Wrote: ------------------------------------------------------- > One final parting shot: > > Bid = 100, ask = 102 > > What’s the spread in percentage terms? 1.96%
2/102 = 1.96% Dreary Wrote: ------------------------------------------------------- > One final parting shot: > > Bid = 100, ask = 102 > > What’s the spread in percentage terms?